Caffrey & Company LLC

08/23/2022

Closed $8 Million loan on a self-storage facility in Northern California. Caffrey & Company LLC placed an $8 million loan with a regional recourse lender. The loan was in part refinance and cash out on a stable self-storage facility in northern California. This stable property is situated on 7.7 acres, 96,300 SF of buildings, plus ample outside RV/boat storage. The loan terms was 10-years, with a 30-year amortization, 5-year rate reset initial rate well below 4.40%. Prepayment penalties step-down 3%, 2%, 1%, open to repay after the third year and if arms-length sale.

12/29/2021

Caffrey & Company LLC placed a $20.83 million construction loan with a regional bank. This ground up apartment construction will include 194-unit market rate apartments located on the southwest side of the Kansas City Missouri Metro. The Apartment Complex is in an Opportunity Zone. Financing for this ground up construction of a multifamily included a 10-year term, floating rate Prime + 0.25%, 3-years Interest Only then converting to 25-year amortization schedule, no prepayment penalties, 80-percent loan to costs.

12/20/2018

Apartment Building Loans with 15% down payment:
Are high leverage loans available for traditional apartment buildings? Yes, in major and standard size markets. For the traditional apartment complex with a value well over $5 million Mezzanine funds are available. We can help place the first mortgage on the property, also known as the Senior Loan as well as the Mezzanine Loan. Non-recourse Mezzanine funds come in behind the Senior Loan. While the Mezzanine Loan walks and talks like a second mortgage it is not a second mortgage. In a second mortgage just as the phrase implies the collateral supporting this debt is a mortgage behind the first mortgage (or Senior Loan), thus in second position. The collateral pledged to support the Mezzanine Loan is pledge of equity of the borrower. The borrower would pledge its ownership interest in the subject property. If the borrowing entity is a corporation the borrower/principals would pledge all of the stock, if a limited liability company the borrower/principals would pledge the Members Units.
The Capital Stack would appear as follows:
Equity: 15% - 20%
Mezzanine: 5% - 15%
Senior Loan: 65% - 80%

The Senior Lender and the Mezzanine Lender would enter into an inter-creditor agreement. Several nationwide lenders offer a one stop shop. These lenders provide both the Senior Loan as well as the Mezzanine Loan.

What terms are available and what will the Mezzanine Loan costs? When you see the costs, don’t stop reading until you see the blended rate. The loan terms range between 5 and 10-years. The amortization schedules are normally aligned with the Senior Loan. So, if the Senior Loan is for 10-years with a 30-year amortization the Mezzanine Loan would be for 10-years with the same 30-year amortization. The pricing or interest rate for the Mezzanine Loan ranges between 12% and 15% depending on the amount of leverage, market and sponsor strength. At this point I would expect you to say no way would you pay this much for a loan. You should consider this type of funding in place of equity. What return would an investor require? If you needed an extra 5% of equity to round out the 20% equity requirement to close this would mean the equity investor would own 25% of the project, they would be entitled to 25% of the net income, 25% of the tax benefits and they most likely would have a vote on how the property will be managed. While the Mezzanine Lender would not have ownership or votes on how the property is managed. Let’s examine the financial impact of a 5% mezzanine loan.

Purchase price of a property: $10,000,000
Equity: 15% or 1,500,000
Mezzanine 5% of the Capital Stack is: $500,000.
First Mortgage (Senior) Loan: $8,000,000

First Mortgage Rate of 5.25%
Mezzanine Rate: 12%

The blended rate would be 5.647%.

The Mezzanine Lender can consider a reduced Debt Service Coverage Ratio (“DSCR”) as low as 1.05x while most of the time the overall DSCR must be at least 1.10x.

Are Mezzanine Loans available for only Apartment Buildings? Mezzanine Loan are available for acquisition, refinance of stabilized multifamily, retail, office, hotel, industrial and self-storage properties financed simultaneously with the First Mortgage (Senior Loan).

Mezzanine Loans start at $500,000 and can go up to $5,000,000 with our preferred lender.

Call your commercial mortgage expert for more information about this exciting loan product.

Mike Caffrey: (913) 402-7077
[email protected]
www.CaffreyLoans.com

11/22/2017

Secrets in loan pricing from Freddie Mac and Fannie Mae:
Does it matter which Freddie Mac or Fannie Mae lender you go through? Since all of the pricing is the same, correct? Wrong! Pricing is different between licensed Freddie Mac and Fannie Mae originators. Each originator has a specific internal profit margins they are trying achieve. Caffrey & Company LLC has an alliance with over 40 other mortgage brokers throughout the US. This affiliation gives Caffrey & Company LLC clout with lenders to offer the best pricing and at the lowest costs. You, the borrower benefit from this alliance. What other aspects go into Freddie Mac and Fannie Mae loan pricing? Here are some of the most common underwriting events that effect pricing:
• The population size of the assigned MSA will impact the pricing. Smaller population centers are priced wider (higher) than the same property located in a larger population center.
• Make sure your mortgage banker checks the subject property rents against the “affordability” index used by Freddie Mac and Fannie Mae. Both of these lenders will apply a rate discount if the average rents for on your subject property fall below a certain economic threshold. If they do you could see a reduction on the street quoted rate between 10 and 15-basis points. This does not mean you property has to come with Low Income Tax Housing Credits, it just means your market rent property is collecting average rents below the mean in your submarket. There are no on-going restrictions on the rents should you wish to increase the rents during the life of your new Freddie Mac or Fannie Mae loan.
• Is your mortgage broker experienced enough to be able to identify abnormal expense levels? As a standard practice here at Caffrey & Company LLC we study the historic operating expenses. Often a property owner has the option of classifying an expense as an ongoing operating expense or to treat this same expense as a capital item. What difference could this make to the loan you are in the process of obtaining? If the Mortgage Broker can demonstrate to Freddie Mac and/or Fannie Mae certain expenses found in the Operating Expense column could be reclassified as capital expenditures the lender’s Underwritten Cash Flow will go up which in turn will increase the Underwritten Debt Service Coverage Ratio (DSCR). The higher the DSCR the lower the interest rate. Moving the DSCR from 1.25x to 1.50x could result in a further reduction in interest rates by 10 to 15 basis points. As a general rule the Loan to value follows these same principals. The lower the loan to value, the lower the interest rate will be because the DSCR ratio on a lower leverage loan is generally be higher than on a higher leverage loan. Recently we were working on an acquisition. Our client was in the market for an 80% loan to purchase. Because of our unique and professional underwriting we were able to move certain expense items in the historic operating expenses to “below the line,” resulting a 10 basis point reduction in the interest rate.
• Fannie Mae and Freddie Mac have their own specific closing costs. It is difficult to know which lender has the lowest closing costs before you are engaged. Reduce these closing costs surprises by working with experienced mortgage brokers that can provide accurate estimated closing costs before you are financially committed to a loan.
• Nobody likes paying fees. If your mortgage broker charges a fee of 1.0% how does equate to the interest rate charged on the loan? On a 10-year fixed rate term loan with a 30-year amortization roughly a 15 basis point swing in interest rates is equal to 1.0% in proceeds, or on present value basis coverage the mortgage brokers 1.0% fee. One Hundred (100) basis points equal One Percent (1.00%).
We have more underwriting details on many loan products found in our web site: www.CaffreyLoans.com. If you have a question feel free to call or email Mike Caffrey direct at (913) 402-7077 email: [email protected].

We specialize in commercial real estate loans from $1,000,000 and up for acquisition or refinancing of Multi-Family Apartment Buildings, Shopping Centers, Mixed-use, Office, Retail, Mobile Home Parks, Mini-Storage, Industrial, Hotels and Motels, and Specialty Properties. (Multi-family financing is a...

11/20/2017

How do I qualify for a commercial real estate loan?
We receive this question often from our clients along with the initial loan request. Commercial Investment properties are different from your typical home loan request. When buying a home for your personal residence where normally there is no net income being generated from the subject property the lender will focus on the value of the property relative to the loan request, the principal(s) credit history/rating and the overall ability of the principal(s) to repay the loan from reoccurring revenue sources taking in consideration of all debts of the principal(s). When buying commercial income producing real estate the lenders often take all of the above in consideration, PLUS the economics of the commercial property up for financing consideration.

You could have a high credit score, abundant re-occurring income, substantial fixed and liquid assets which would allow you to qualify for a residential loan, subject the loan to value of the underlying home. For commercial investment properties understanding the net income generated by the subject is a very important part of the overall loan underwriting process.
While the items above are important we recommend starting with a) identifying any past credit or legal actions in the clients past history. If the principals carry a strong credit rating (650 and above), and no credit or court issues we recommend moving right into the actual loan underwriting of the subject commercial real estate. Understanding the economics and how the subject commercial real estate is positioned in the market, coupled with the actual targeted loan request will help us direct the loan request to several of our well over 100-commercial lenders. Our lenders have different and at times unique underwriting requirements and loan products.
Some of our lenders offer non-recourse loans while other require partial to full recourse, some offer long term fixed rates up to 35 to 40-years, while other lenders only offer floating rate loans. Some lenders are not able to loan more than $3,000,000 while others will not consider a loan request below $35,000,000. Some lenders require you to have a certain net worth (e.g. one or two times the loan amount), while some lenders do not have a specific net worth requirements. Some lenders have specific liquidity requirements while others do not. Some lenders require you have experience with the property type you are financing other lenders do not have this requirement.
Our job is to listen to your loan request. Understand the economics of the subject property, know your background as it relates to commercial real estate investment properties and submit your loan to the lenders that would provide the best end loan product for you.
What information and documents are required before presenting you’re a loan request to our commercial lenders? Start with a detailed personal financial statement. If you do not have a form just call and we can email a blank personal financial statement form. A brief resume outlining the principal(s) background in commercial real estate investment properties is helpful. A common lender request is a Real Estate Owned Schedule. This form is required from the Government Sponsored Entities (“GSE”) such as Fannie Mae and Freddie Mac. Many commercial banks also will request a similar schedule normally called a Global Cash Flow Analysis. The Real Estate Owned Schedule normally includes:
• Property type, address, Acquisition Date, Current Occupancy, details on existing debt, past year income and past year operating expenses with the resulting net operating income (“NOI”) and after subtracting the any debt service arriving at the net cash flow. As mention many commercial banks request a Global Cash Flow schedule. This would generally include the same information as indicated for the Real Estate Owned Schedule plus a breakdown of all other debts, e.g. car payments, credit cards. Additionally, the lenders requesting the Global Cash Flow schedule will ask for an itemization of your income sources.

Without a doubt if you own many other income producing property’s it can be a time consuming exercise to complete these schedules. We recommend having the data available, but do not complete the schedules until requested. Not every lender requires these schedules, and some that do require these schedules insist on completing in their forms.
While credit history, experience level in commercial real estate investments, financial net worth and liquidity are important, lenders do not give equal weight to these components when completing the loan underwriting process. Some lenders require three years of complete Federal Income Tax Returns some lenders do not require tax returns at all.
In order to obtain an early indication of what loan terms may be available for a stable income producing investment property start with:
1. A current detail rent roll.
2. Last two years and year to date detailed Profit and Loss (“P&L”) statement.
3. Brief property description including the address, age, unit mix, square footage, land area, off street parking spaces and photos are helpful.
4. Detailed personal financial statement – showing liquid assets (breakout separately assets held in qualified retirement accounts) completing the financial statement form.
5. Brief resume on the principals as it relates to experience with the ownership and or management of investment real estate. For example Freddie Mac and Fannie Mae would like to see the principals have a history of ownership and/or management of four or more like properties. If the principals do not carry this level of experience a third party management company may be required. We can provide some guidance on this topic.
6. We will assume no negative credit or court issues unless the principals indicate they do in fact have some past issues that will need to be addressed. We can either assist with mitigating these past issues or present to a lender who is accustomed to working with borrowers that have some credit or court issues in their background.
The above information will help us determine which of our lenders would have the best loan product for you. We work for you to place the best loan the market has to offer.

For more information go to: www.caffreyloans.com

11/20/2017

Caffrey & Company LLC was founded in April of 2000 by Mike Caffrey. The primary goal of our services is to a help our clients find the best commercial real estate loan that fits their particular needs. You will receive the benefit of 40 plus years of underwriting skills and Caffrey & Company’s access to hundreds of lenders. You are our client, Caffrey & Company LLC works for you to find the best solution to your financial needs. We stay involved every step of the way. So, if you are looking for a long term low interest rate loan for an Apartment Complex, a loan to finance the acquisition of an Office Building or a Retail Shopping Center you are at the right place.

Caffrey & Co. will prepare the loan underwriting package, determine which of the many lenders will have the best loan products and ask those lenders to compete for your business. Mike Caffrey has underwritten thousands of commercial real estate loans from the time he was a young banker as he moved up the ladder to the bank President and CEO, along with the creation of two multi-billion dollar commercial mortgage backed securities operations. Mr. Caffrey was an executive for Midland Loan Services and the other as a founding member of National Realty Funding. You would be hard pressed to find any commercial mortgage broker with more loan underwriting background than Mr. Caffrey. He brings this experience to your loan request.

Many of our clients start by asking how much will they have to pay in closing charges? This can vary widely between lenders. Yes, this is an important question to ask. Here is what we do. We listen to the client’s goals and objectives. With this information we complete the loan underwriting package (no charge to the client), present the loan to the lenders that have the loan products that will be the best fit for our client. The lenders provide loan proposals in return (still no out of pocket expenses to the client). We then go over the loan proposals that are the best fit with the client going over the estimated closing costs for each loan. In the end we believe it is part of our duty is to provide enough information and details about the loan(s) so the client can make an informed decision before reaching for the checkbook.

Loans for Apartments are one of the most active property types of loan placement. This includes loans for Mobile Home Parks, Student Housing, Senior Living Centers and loans for Nursing Homes. If you are looking for a non-recourse loan through one of the GSE (Government Sponsored Entities) such as Fannie Mae, Freddie Mac, or HUD/FHA we can help. Did you know not all Freddie Mac and Fannie Mae loans are underwriting the same? They are not underwriting varies between lenders, additionally, pricing for the very same loan product can vary between these lenders. Do you know which lender offers better pricing? Do you know which lender has a more conservation underwriting program which can reduce the requested loan dollars at the last minute? Because we work on hundreds of loans we know what lender would be the best fit for your loan.

We have direct contacts with Wall Street Commercial Mortgage Back Securities (CMBS) firms, also known as a Conduit. Mr. Caffrey has an in depth knowledge of the CMBS loan products and the lenders that specialize in Conduit loans.

Caffrey & Company LLC represent over 50 insurance companies that have excellent low interest rates for commercial real estate loans. Insurance companies invest in commercial real estate loans as an alternative to buying bonds for their investment portfolio.